Insurance and Finances

Baby Boomers: Retirement or Survival?

I recently spoke with a couple looking for life insurance to protect their mortgage. They had just completed a refinance on their home for a new 30 year term. As I was taking down information from this woman, I asked her for her birthday. I believe I gasped when she told me the year she was born. 1927! Yes, you can refinance a house at the age of 84. She was calling me from her office where she works to supplement income for her and her husband. Let me just tell you: If you can afford the payment for $100,000 in life insurance at age 84, you could afford to pay off your house.

This story illustrates everyone’s greatest fears in retirement. Scraping by. Refinancing to afford payments. Fearing death because our spouse might become homeless. Having no money to pay for a funeral. And working a job in our 80’s!

Startling fact: Almost half of all Baby Boomers will not have sufficient funds to cover basic needs and health care cost during retirement.

Most people are just in denial of their financial situations. You cannot make $50,000 a year and retire with $50,000 in the bank. These numbers don’t add up. A Boomer couple age 65 can expect at least one person to live to age 88. That’s $1,150,000 of money you will spend at the same rate in retirement. Well what about Social Security you say? At $50,000 a year at current age 55 you can expect around $1,385 a month. That will cover $386,400 of your $1,150,000 needed. Are these numbers adding up yet? You still need $763,600 to continue at the same pace in retirement.

Even those of us that save for retirement usually try to amass as large of a pile that we can and then eat away at pieces of the pile over the years. But what happens if you live to 95? What if you need some help with a trip to the restroom? We all love the idea of Social Security. A monthly check that never stops until you are gone. There is a private version of what SS does called annuities. Annuities are a retirement tool that protects us from ourselves. Most people who do everything right and save what they think is needed for retirement can still run out of money. My grandma is a great example. My grandfather retired from Phillips 66 with plenty to supply their needs, but my grandma had nothing when she passed away.

As you approach retirement, take a chunk of your money and put it into and annuity. Consider it gone. You won’t have that piece of your retirement anymore, but it will be a monthly check that pays out until the day you die. Even if have only $50,000 heading into retirement I might put it all in an annuity. You could spend the $50,000 in a year or two, but if it were stretched would last the rest of your life. Consider annuities as part of your retirement. They are safe and give you many options on payouts.